Measuring Climate Change Risk on Supply Chain of Rice in Bangladesh

Abstract

Climate change may cause abrupt fluctuations in weather and it is a potential threat to rice production of Bangladesh. Existence of the causal relation between the state of weather and rice production sets the objective of this paper to measure the probable risk on supply chain of rice due to climate change. Applying the risk analysis techniques for stock-market portfolio analysis, risk and return of climate induced fluctuation of rice production is estimated. The yield of three different types of rice varies in different weather conditions like drought, flood etc. In an unfavourable weather condition, yield of rice is lower than the expected yield. A 30% increase of probability of drought, flood and joint occurrence of drought and flood may reduce annual expected rice production by 95.4, 65.2 and 76.3 thousand metric tons respectively on average in the long-run. In an actual year of drought, the production of rice may be 1.92 million metric tons less than normal expected production. The risk of fluctuation in rice production increases with higher probabilities of bad weather. Fluctuation of rice production may make the supply chain of rice vulnerable. Hence, climate change should increase the risk of supply chain instability for rice in Bangladesh.